The Bottomless Pit

Every month we think we're getting closer to the bottom of the housing market and when the data come out we inevitably hear the same thing: "We're almost there". Well guess what? Another month's worth of data on existing and new home sales and still no evidence the carnage has ended. Moreover, home foreclosure data suggest the housing market might not exit its free-fall for quite a while. According to the Mortgage Bankers Association (MBA), nearly 1 in 25 mortgages were somewhere in the foreclosure process at the end of the first quarter, with 1.4 percent of loans entering foreclosure during the period. Both of those measures were record highs.

More troubling is the fact that lower credit-quality subprime loans no longer comprise the bulk of foreclosures, as prime fixed-rate and adjustable rate mortgages accounted for the majority of new loans being foreclosed upon. Thus, it's likely that job losses have much more to do with recent foreclosure activity than interest rate resets or recast loan payments. Given that unemployment rates will likely continue to rise into next year, foreclosures could continue to rise beyond that and hinder the housing market's recovery.